Inflation is topic #1 on Wall Street today, as the Bureau of Labor Statistics announced its latest reading on the Consumer Price Index (CPI). It was all good news here as the CPI dropped to just 3%, a number we last saw back in 2021 before inflation had taken hold of our economy and before the Fed started raising interest rates.
Wall Street was ecstatic. 3% inflation is lower than even the most optimistic analysts expected and indicates that the Fed may be able to relax.
While the Street was busy clapping each other on the back, there was one group we failed to acknowledge and should have. It was the Energy Sector. The real reason for this lower inflation is the reduced energy cost. Energy was the principal driver of higher inflation over the past year but has become quiescent.
Over the past five months, the Global Energy Index (reproduced in red below) has declined roughly 10%, more than enough to ease those Inflation pressures.
Global Energy Index (red, left), CPI Inflation (blue, right)
You can find the complete BLS Report on the Consumer Price Index here: